Money Insider: Lloyds Bank joins scramble for new current accounts
Friday 28 March 2014
The unprecedented level of activity in the current account market shows no sign of abating, with Lloyds becoming the latest high street name to revamp its bank account offer from Monday.
It has badged its new account 'Club Lloyds' and looks to reward those who use it as their main account for day-to-day banking.
Looking at the offer in more detail, the interest paid on credit balances is the bait that Lloyds hopes will hook most customers.
There is a headline 4 per cent AER on balances between £4,000 and £5,000. On smaller balances you'll get a less impressive 1 per cent from £1 to £1,999 and 2 per cent from £2,000 to £3,999.
The credit interest is competitive but for existing Lloyds Vantage customers it is less attractive on smaller balances. For those with bigger credit balances, the 123 deal from Santander paying 3 per cent from £3,000 to £20,000 remains attractive.
Other benefits include access to a monthly saver account paying 4 per cent and allowing you to pay in up to £400 per month and with the chance to receive interest on a monthly basis.
For customers taking out a Lloyds Bank mortgage there is a Club discount of 0.2 percent. It's a decent reduction but you'd still be wise to get an independent mortgage broker to check the deal represents a good rate compared against the whole market.
There is also a free 'lifestyle option' where you choose from six free cinema tickets a year, an annual magazine subscription or a restaurant discount card. Nice to have but not the basis on which to choose your bank account.
When it comes to overdrafts I'm pleased to see the introduction of a £100 interest and fee-free buffer but at the same time disappointed that the high overdraft interest rate of 19.94 percent EAR and £6 monthly usage fee remain.
If you're not somebody who keeps much of a credit balance and are regularly overdrawn more than £100, there are cheaper bank accounts to choose from.
Similarly, if you use your debit card abroad, you'll pay a 2.99 per cent foreign transaction levy plus a £1 charge for each card purchase made outside the UK. So if you're a frequent traveller overseas this may not be best account for you. To qualify for the account, you must pay in a minimum of £1,500 a month (three times the amount required by TSB) and have at least two monthly direct debits.
If you don't want to meet these requirements, you can still open a Club Account but it'll cost £5 a month, which dilutes the financial benefits and will prevent people using it as an additional savings account.
As with all current accounts, Club Lloyds has its good and not so good points depending on how you run your day-to-day banking. So it's essential to make sure you understand how the different components will work for you before signing on the dotted line.
Andrew Hagger is an independent personal finance analyst from www.moneycomms.co.uk
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